Bills Digest no. 87 2007–08

WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.

Items 29 to 31 of Schedule
1also take effect on the date of Royal Assent unless
Schedule 1 to the Screen Australia and National Film and Sound
Archive (Consequential and Transitional Provisions Act 2008
commences on a day before this Bills provisions received Royal
Assent. If this is the case these particular items do not commence
at all.

The measures in this Bill were first introduced into Parliament
in the Superannuation Legislation Amendment (Trustee Board and
Other Measures) (Consequential Amendments) Bill 2007, which lapsed
with the calling of the Federal election in October 2007. This Bill
was, however, passed by the 67th House of
Representatives in August 2007 with the support of the (then)
opposition.

There are three main Commonwealth civilian superannuation
schemes, the Commonwealth Superannuation Scheme (CSS), the Public
Sector Superannuation Scheme (PSS) and the Public Sector
Superannuation Scheme Accumulation Plan (PSSAP).[2] The first two are now closed to
new members while the PSSAP commenced operation from 1 July 2005.
This latter scheme is the main Commonwealth superannuation scheme
for those first entering the Commonwealth public service from the
above date.[3]

The management of all three schemes is under taken by the
Australian Reward Investment Alliance (ARIA). This body replaced
the former CSS and PSS boards.[4]

From 1 January 2005, the Legislative Instruments Act
2003 (LIA) established a regime to reform and manage
procedures for the making, scrutiny and publication of Commonwealth
legislative instruments by:

establishing a Federal Register of Legislative Instruments

encouraging rule-makers to undertake appropriate
consultation

encouraging high standards in drafting legislative instruments
to promote their legal effectiveness, clarity and their
intelligibility to users

providing public access to legislative instruments

establishing improved mechanisms for Parliamentary scrutiny of
legislative instruments, and

establishing sun-setting mechanisms to ensure periodic review
of legislative instruments and if they no longer have a continuing
purpose, to repeal them.[5]

The Bill, as mentioned in the purposes section,
introduces a new regime for the management of legislative
instruments in the superannuation field. It removes outdated
references to the Acts Interpretation Act 1901 but
continues on the same arrangements with respect to disallowable
instruments.

Under the Provisions of the Superannuation Guarantee
(Administration) Act 1994 (SGAA) and employer must contribute
an amount equal to 9 per cent of an employee s wages to a
superannuation fund on their behalf. The concept of an earning base
defines the minimum amount that can be taken as the employee s
earnings for Superannuation Guarantee (SG) purposes.

The minimum level of employer superannuation support required is
calculated as a percentage of an employee's notional earnings base. The relevant earnings base is usually specified in the superannuation
fund trust deed, a law of the Commonwealth, a state or territory,
an industrial award or a workplace agreement. If there is otherwise
no acceptable earnings base, the ordinary
time earnings of the employee is used as the notional earnings base.

The Superannuation Laws Amendment (2004 Measures No 2) Act
2004 (no. 93 of 2004), simplifies the earnings base of an employee for SG purposes. The SGAA
amendments, already enacted, but applying from 1 July 2008, will
have the effect that all employers will calculate their SG
liability against an employee s ordinary time earnings. Various
provisions will be removed from 1 July 2008 so that the simpler
ordinary time earnings will be the basis of calculation in all
cases.

From 1 July 2008, employers will still be able to use notional
earnings bases specified in legislation or industrial agreements as
the basis of their SG contributions where these are above an
employee's ordinary time earnings, but an employer s SG liability
will only be assessed against the employee s ordinary time
earnings.[6]

As noted above, most, if not all, of the provisions in this Bill
were first introduced to Parliament in the Superannuation
Legislation Amendment (Trustee Board and Other Measures)
(Consequential Amendments) Bill 2007 on 28 February 2007 in the
House of Representatives.

Otherwise, as this Bill contains only consequential measures
arising from the passing of other legislation no separate policy
commitment was required.

Generally, Schedule 1 of this Bill amends
various Acts to take account of:

changes in the management of the Commonwealth s superannuation
arrangements, specifically the replacement of the former
Commonwealth Superannuation Board of Trustees No.1 by the former
CSS and PSS Boards

the Commonwealth Superannuation Board of Trustees No.1 was
responsible for the management of the Commonwealth s superannuation
arrangements before being replaced by the former CSS and PSS
Boards.

the introduction of the ARIA as the sole body managing the
Commonwealth s main civilian superannuation schemes from 1 July
2006, and

the introduction of the PSSAP from 1 July 2005.

These amendments generally ensure that ARIA is
the appropriate body to issue an invalidity certificate for members
of various Commonwealth Commissions and Authorities when employees
of such bodies are to be retired on the grounds of physical or
mental incapacity. These certificates were previously issued by
ARIA s predecessors, the PSS or CSS Boards, as appropriate.

Schedule 2

Items 1 to 28 and
items35 to 38
amend various acts to ensure that legislative instruments made
under those particular Acts are instruments under the LIA.

Items 12 and 13 amend the
Superannuation Act 1976 to enable ARIA to make
declarations in relation to the table of productivity benefits in
section 110C as well as under section 110D of that Act, instead of
the Minister for Finance and Administration.

Since the late 1980s Commonwealth public servants have been
receiving an additional 2 to 3 per cent of their wages paid into
their superannuation fund as a productivity contribution. These
productivity contributions were paid on a before tax basis and do
not affect a superannuation fund member s salary.

Items 19 and 20 remove the
requirement in the Superannuation Act 1976 for the CSS
interest rate determinations to be published in the Commonwealth
Gazette.

These interest rate determinations are in fact
the investment rates of return for the CSS investment funds. They
are now published at regular intervals on the CSS web site. In
former years they were determined one a year after the close of the
financial year. It is arguable that few CSS members read the
Gazette to obtain this information, instead relying on ARIA s
publication of these rates of return on the CSS website.

Item 29 of Schedule
2 amends subsection 5A(2) of the
Superannuation Act 1990. The amendment requires that
subsection 5A(2) omits subsection
48(2) of the Acts Interpretation Act 1901 and
refers instead to subsection 12(2) of the LIA.
Similar changes are made by item 32 to
subsection 45(6) of the Superannuation Act
1990.

Former subsection 48(2) of the
Acts Interpretation Act 1901 was deleted by the
Legislative Instruments (Transitional Provisions and
Consequential Amendments) Act 2003 Act. It allows legislative
orders to have retrospective effect. The proposed amendments insert
a reference to subsection 12(2) of the LI Act into the
Superannuation Act 1990. This latter subsection has
equivalent wording to the now repealed subsection 48(2) of the
Acts Interpretation Act 1901. Thus, these amendments can
be seen as continuing current policy.

The effect of Schedule 3 of this
Bill is to remove the original version of the PSS Trust Deed from
the Superannuation Act 1990. This Deed has been amended on
more than 27 occasions since the Superannuation Act 1990
was enacted. The removal of the original trust deed from this Act
will ensure that the original trust deed is not mistaken for the
current form of the deed.

Schedule 4 amends legislation governing the CSS
and the payment of the productivity benefit to Commonwealth public
servants to conform with the requirements of the SGAA.

As noted above, the productivity benefit is an extra 2-3 per
cent of wages paid into the superannuation accounts of Commonwealth
public servants from 1988.

What is the SG Shortfall?

The SG shortfall is the difference between the actual level of
contributions made by the employer and the required level of
support under the provision of the SGAA. Generally, the required
level of support is 9 per cent of the employee s ordinary time
earnings (i.e. earnings not including overtime). If the employer
does not meet this required level of support, the shortfall
calculation can be based on the employee s total income for the
period (SG is paid on a quarterly basis). This can include any
overtime earned by the employee. Thus, the payment of the SG
shortfall by an employer can include a penalty component in that
the total amount paid that is more than would otherwise be paid if
the employer had met their SG obligations in the first
place.[8]

Items 3 to 7 amend the
Superannuation (Productivity Benefits) Act 1988 so that
the payment of the productivity benefit is in accordance with the
requirements of the SGAA.

The provisions of this Bill introduce little new policy.
Generally, these changes simply update existing legislation to take
account of prior and future changes in general superannuation law,
the Commonwealth s administration of its civilian superannuation
schemes and the introduction of the new PSSAP. The majority of the
changes in this Bill are overdue.

[2]. The other
Commonwealth civilian superannuation schemes are the Australian
Government Employees Superannuation Trust (also open to the public)
and the schemes covering Federal and High Court Judges and the
Governor General.

[3]. Further
background on the establishment of the PSSAP can be found in Leslie
Nielson, Superannuation Bill 2005 , Bills Digest, No. 162,
Department of Parliamentary Services, Canberra, 2004 05.

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